I have been fortunate to be a long-suffering tanker bull. This applies to both crude carriers and clean tankers (so called because they carry refined products).
As I have mentioned in various weekly updates we own several tanker companies. I originally bought them as a play on net asset value. The ships were selling well below what in many cases were below what they could be sold for or in some cases scrapped for.
The Russian invasion of Ukraine kind of changed the dynamic for tankers in general. As sanctions were imposed on Russia western countries and refiners were hesitant to take Russian crude. This forced Russia to discount its crude and export to countries like China and Russia.
However, this created other issues. The global tanker market typically trades on thin margins. When the efficient transport routes were disrupted this led to further distances having to be traveled with the same number of tankers. Viola, instant increase in rates and a tanker bull market.
Similar things are happening in so-called clean tankers with the recent sanctions on Russian refined products. People still need oil and refined products but now have to bring them from further away with the same fleet size.
One of the best tanker commentators I have found is a person on Twitter that goes by the handle E Finley Richardson. He has a Substack and Twitter account which I highly recommend if you are in the tanker trade.
A recent article posted on Substack entitled “The Start of Something New” is worth your attention. A few snippets:
“The reason I have spent this much time considering and documenting LR rates and profitability is because the crux of the product tanker thesis rests upon the idea that Russian clean petroleum products will be shipped further to new customers, and Russia’s FORMER biggest customer, Europe, will source its clean petroleum products from farther away. Both are thought to lead to higher LR utilization, and thus higher rates across the spectrum of product tankers.“
I had no idea that tanker rates would surge because of a war between Russia and Ukraine. Nevertheless, I was positioned in Tankers because they were cheap and we got lucky. Sometimes it just pays to be in the right place at the right time.
Tanker rates are volatile so this is an industry for those with a strong stomach. However, as long as sanctions are in place voyages are going to take longer.
There is not a chance the fleet will be expanded anytime soon for several reasons so this cycle of higher rates could last longer than most expect. Not Investment Advice.